Which of the following statements regarding amortization is true?
A)Amortization of the premium causes the Premium on Bonds Payable account to increase.
B)Amortization of the premium causes the amount of interest expense to increase.
C)Cash interest payments on bonds equals interest expense on the income statement when there is amortization of a bond premium.
D)Amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero.

Question

Quizplus · Accepted Answer

Amortization of a premium on bonds payable is the process of gradually reducing the premium amount over the life of the bond. This process decreases the balance in the Premium on Bonds Payable account over time until it reaches zero, aligning the book value of the bond with its face value at maturity.

Which of the Following Statements Regarding Amortization Is True